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Botswana Lesotho COUNTRY REPORT Botswana Lesotho 3rd quarter 1998 The Economist Intelligence Unit 15 Regent Street, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent Street The Economist Building 25/F, Dah Sing Financial Centre London 111 West 57th Street 108 Gloucester Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.171) 830 1000 Tel: (1.212) 554 0600 Tel: (852) 2802 7288 Fax: (44.171) 499 9767 Fax: (1.212) 586 1181/2 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: http://www.eiu.com Electronic delivery EIU Electronic Publishing New York: Lou Celi or Lisa Hennessey Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 London: Jeremy Eagle Tel: (44.171) 830 1183 Fax: (44.171) 830 1023 This publication is available on the following electronic and other media: Online databases Microfilm FT Profile (UK) NewsEdge Corporation (US) World Microfilms Publications (UK) Tel: (44.171) 825 8000 Tel: (1.781) 229 3000 Tel: (44.171) 266 2202 DIALOG (US) Tel: (1.415) 254 7000 CD-ROM LEXIS-NEXIS (US) The Dialog Corporation (US) Tel: (1.800) 227 4908 SilverPlatter (US) M.A.I.D/Profound (UK) Tel: (44.171) 930 6900 Copyright © 1998 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author’s and the publisher’s ability. However, the EIU does not accept responsibility for any loss arising from reliance on it. ISSN 1356-4021 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK 1 Contents 3 Summary Botswana 5 Political structure 6 Economic structure 7 Outlook for 1998-99 9 Review 9 The political scene 12 Economic policy 14 The economy 15 Business and commerce 16 Finance 17 Infrastructure 17 Health 18 Agriculture 18 Mining 19 Foreign trade and payments Lesotho 21 Political structure 22 Economic structure 23 Outlook for 1998-99 25 Review 25 The political scene 27 The economy 31 Quarterly indicators and trade data List of tables 9 Botswana: forecast summary 14 Botswana: employees and average earnings by sector, Mar 15 Botswana: migrant workers in South African mines 17 Botswana: comparative telecommunications indicators, 1996 20 Botswana: foreign-exchange movements, 1998 20 Botswana: external debt 24 Lesotho: cereal forecast, 1998/99 29 Lesotho: external debt 31 Botswana: quarterly indicators of economic activity 31 Lesotho: quarterly indicators of economic activity 32 Botswana and Lesotho: UK trade EIU Country Report 3rd quarter 1998 © The Economist Intelligence Unit Limited 1998 2 List of figures 9 Botswana: gross domestic product 9 Botswana: pula real exchange rate 16 Botswana: stockmarket capitalisation EIU Country Report 3rd quarter 1998 © The Economist Intelligence Unit Limited 1998 3 June 29th 1998 Summary 3rd quarter 1998 Botswana Outlook for 1998-99: The new president, Festus Mogae, will try to consolid- ate his position over the coming year. His choice of Ian Khama as vice- president was not welcomed by the main factions of the ruling BDP, but the new leadership is expected to gain rank-and-file support. Although Mr Mogae is expected to face some challenges in the presidential contest in 1999, the main opposition party, the BNF, is so divided that the BDP will almost certainly win the national election that year. Increased government spending ahead of the election is likely to push up inflation in the second half of 1998, yielding an annual average rate of 8.3%. The government may also record a fiscal deficit for the first time for several years, as tax revenue from diamonds falls owing to weak Asian demand. Meanwhile, lower diamond earnings are expected to reduce the current-account surplus over the forecast period and slow real GDP growth to 6% in 1998. Review: Although President Mogae’s technical expertise on policy is not in doubt, his political skill has been put to the test by the need to reconcile opposing factions within the ruling BDP, and his choice of Mr Khama as vice- president was controversial. Schisms within the opposition BDF have intens- ified, and the government has attracted criticism for its treatment of the Baswara people and for harassing journalists. Relations with Namibia have improved following the opening of the Trans-Kalahari highway. The IMF has praised Botswana’s sound macroeconomic management but has warned against fiscal irresponsibility in the run-up to the 1999 election. The Bank of Botswana, meanwhile, has cautioned against pay rises that are not linked to productivity. Economic growth figures are encouraging, but unemployment is high and rising. Following a strong first quarter, the stock exchange has levelled off. Inflation has begun to creep up, but international reserves remain high. Lesotho Outlook for 1998-99: The new prime minister, Pakalitha Mosisili, will seek to consolidate his position and assert his independence, while economic policy will remain largely unchanged. The opposition, with only one seat in parlia- ment, will seek other means to exert its influence but will remain marginalised. The outlook for the gold sector, and thus for Basotho miners, is bleak but, despite further redundancies, many workers will stay in South Africa rather than return home. Owing to poor and intermittent rains in 1997/98 associated with El Niño, the cereal harvest will meet only one-third to one-half of the nation’s requirements. High existing stocks and imports will, however, miti- gate the impact on food prices. Review: The legislative election on May 23rd resulted in a landslide victory for the incumbent LCD, which won 78 of the 79 seats contested and 61% of the popular vote. Observers considered the election generally free and fair, but opposition parties have protested. Mr Mosisili has taken over as prime minister and has named his government: two potential challengers, Kelebone Maope EIU Country Report 3rd quarter 1998 © The Economist Intelligence Unit Limited 1998 4 and Shakhane Mokhehle, have been persuaded to accept cabinet posts, and Tom Thabane has become foreign affairs minister. Strong average real GDP growth has continued, but 9,000 Basotho miners in South Africa have recently been made redundant. The Highlands Water project has won a vote of confi- dence from the World Bank, and the privatisation of two state-owned banks has been announced. Growth in the foreign debt stock slowed in 1996, while official development assistance showed a decline. Editor: Todd Moss All queries: Tel: (44.171) 830 1000 Fax: (44.171) 830 1023 EIU Country Report 3rd quarter 1998 © The Economist Intelligence Unit Limited 1998 Botswana 5 Botswana Political structure Official name Republic of Botswana Form of state Unitary republic Legal system Roman-Dutch law; cases in rural areas are heard by customary courts National legislature National Assembly; 40 members elected by universal suffrage, the president, the attorney-general and four members appointed by the president. A 15-member House of Chiefs advises on tribal matters National elections October 1994 (legislative); next election due by October 1999 (legislative) Head of state President, chosen by the National Assembly National government The president, his appointed vice-president and cabinet Main political parties Botswana Democratic Party (BDP), the ruling party; Botswana National Front (BNF); Botswana People’s Party (BPP); United Action Party (UAP) The government President Festus Mogae Vice-president, minister of presidential affairs & public administration Ian Khama Key ministers Agriculture Ronald Sebago Commerce & industry George Kgoroba Education Gaositwe Chiepe Finance & development planning Ponatshego Kedikilwe Foreign affairs Mompati Merafhe Health Chapson Butale Labour & home affairs Bahiti Temane Local government, lands & housing Daniel Kwelagobe Mineral resources, energy & water affairs Margaret Nasha Works, transport & communications David Magang Central bank governor Baledzi Gaolathe EIU Country Report 3rd quarter 1998 © The Economist Intelligence Unit Limited 1998 6 Botswana Economic structure Latest available figures Economic indicators 1993 1994 1995 1996 1997a GDP at market pricesb (P m) 9,126 11,115 12,530 14,631 18,015 Real GDP growthb (%) 4.1 3.1 6.2 7.0 7.0c Consumer price inflation (av; %) 14.3 10.6 10.5 10.1 9.3d Population (m) 1.39 1.42 1.45c 1.48 1.52 Exports fob ($ m) 1,722 1,874 2,160 2,218 2,769 Imports fob ($ m) –1,455 –1,350 –1,579 –1,293 –1,900
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